@article{79389cc8b3f3403cbf7132cc968d57ed,
title = "Corporate tax avoidance and debt costs",
abstract = "We use path analysis to investigate how corporate tax avoidance is priced in bond yields and bank loan spreads. We find that approximately one half of the total effect of tax avoidance on bond yields is explained through the negative effect of tax avoidance on future pre-tax cash flow levels and volatility and, to a lesser extent, lower information quality. The effects of these mediating variables are much less pronounced for bank loan spreads. The results of additional cross-sectional analyses indicate that, relative to bond investors, banks are able to reduce information asymmetry problems more effectively, given their access to firms{\textquoteright} private information and greater ability to monitor borrowers.",
keywords = "Bank loan spreads, Corporate tax avoidance, Path analysis, Public debt yields",
author = "Terry Shevlin and Oktay Urcan and Vasvari, {Florin P.}",
note = "Funding Information: We are grateful to two anonymous reviewers and Connie D. Weaver (senior editor) for constructive suggestions. We appreciate helpful comments from Atif Ellahie, Katharine Drake, Padmakumar Sivadasan, Scott Richardson, the Texas Tax Readings Group, and seminar participants at Georgia State University, INSEAD, London Business School, Tulane University, The University of Arizona, University of Houston, University of Toronto 2013 Annual Rotman Accounting Conference, and University of Illinois at Urbana–Champaign. Professor Urcan and Professor Vasvari gratefully acknowledge the support of the London Business School RAMD Fund. Professor Shevlin acknowledges financial support from the Paul Merage School of Business at the University of California, Irvine. Funding Information: We are grateful to two anonymous reviewers and Connie D. Weaver (senior editor) for constructive suggestions. We appreciate helpful comments from Atif Ellahie, Katharine Drake, Padmakumar Sivadasan, Scott Richardson, the Texas Tax Readings Group, and seminar participants at Georgia State University, INSEAD, London Business School, Tulane University, The University of Arizona, University of Houston, University of Toronto 2013 Annual Rotman Accounting Conference, and University of Illinois at Urbana?Champaign. Professor Urcan and Professor Vasvari gratefully acknowledge the support of the London Business School RAMD Fund. Professor Shevlin acknowledges financial support from the Paul Merage School of Business at the University of California, Irvine. Publisher Copyright: {\textcopyright} 2020, American Accounting Association. All rights reserved.",
year = "2020",
doi = "10.2308/atax-52605",
language = "English (US)",
volume = "42",
pages = "117--143",
journal = "Journal of the American Taxation Association",
issn = "0198-9073",
publisher = "American Accounting Association",
number = "2",
}